Loans and Related Allowance for Credit Losses | 7. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES Loans that the Company originated and has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for loan losses. Loans acquired through a business combination are discussed under the heading “Acquired Loans”. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method. The loan portfolio is segmented into commercial and consumer loans. Commercial loans are comprised of the following classes of loans: (1) commercial, financial and agricultural, (2) commercial real estate, (3) real estate construction, a portion of (4) mortgage loans and (5) obligations of states and political subdivisions. Consumer loans are comprised of a portion of (4) mortgage loans and (6) personal loans. Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in gains on sales of loans, which is a component of non-interest income. Loans Held for Sale The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans. Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon fair value. Servicing rights are intangible assets and are carried at estimated fair value. Adjustments to fair value are recorded as non-interest income and included in mortgage banking income in the consolidated statements of income. Commercial, Financial and Agricultural Lending The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual credit review. Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, and other methods. In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is performed. Analysis of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis. Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight. Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. Commercial Real Estate Lending The Company engages in commercial real estate lending in its primary market area and surrounding areas. The Company’s commercial real estate portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, commercial real estate loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers. As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers. Commercial real estate loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. Real Estate Construction Lending The Company engages in real estate construction lending in its primary market area and surrounding areas. The Company’s real estate construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans. The Company’s commercial real estate construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc. In underwriting commercial real estate construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, and other resources. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers. Real estate construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well. Mortgage Lending The Company’s real estate mortgage portfolio is comprised of consumer residential mortgages and business loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area. The Company offers fixed-rate and adjustable rate mortgage loans with a term up to a maximum of 25‑years for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The majority of the Company’s residential mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 95% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years. In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations. Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral. Obligations of States and Political Subdivisions The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of this type. Personal Lending The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans. Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background. Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans. Allowance for Credit Losses The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses (“allowance”) represents management’s estimate of probable incurred losses in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of probable incurred losses in its unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. For financial reporting purposes, the provision for loan losses charged to current operating income is based on management’s estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted at least quarterly and are reported in earnings in the periods in which they become known. Loans included in any class are considered for charge-off when: · principal or interest has been in default for 120 days or more and for which no payment has been received during the previous four months; · all collateral securing the loan has been liquidated and a deficiency balance remains; · a bankruptcy notice is received for an unsecured loan; · a confirming loss event has occurred; or · the loan is deemed to be uncollectible for any other reason. The allowance for loan losses is maintained at a level considered adequate to offset probable incurred losses on the Company’s existing loans. The analysis of the allowance for loan losses relies heavily on changes in observable trends that may indicate potential credit weaknesses. Management’s periodic evaluation of the adequacy of the allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. Based on management’s comprehensive analysis of the loan portfolio, management believes the level of the allowance for loan losses as of September 30, 2019 was adequate. A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For commercial loans secured with real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial loans secured by non-real estate collateral, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment disclosures unless such loans are subject to a restructuring agreement. Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time after modification. Loans classified as troubled debt restructurings are designated as impaired. Acquired Loans Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the related allowance for loan losses. Fair value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Loans acquired through business combinations that meet the specific criteria of ASC 310-30 are individually evaluated each period to analyze expected cash flows. To the extent that the expected cash flows of a loan have decreased due to credit deterioration, an allowance is established. These loans are accounted for under the ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition, is referred to as the nonaccretable discount. The nonaccretable discount includes estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows will require Juniata to evaluate the need for an additional allowance for credit losses. Subsequent improvement in expected cash flows will result in the reversal of a corresponding amount of the nonaccretable discount, which Juniata will then reclassify as an accretable discount that will be recognized into interest income over the remaining life of the loan. Loans acquired through business combinations that do not meet the specific criteria of ASC 310-30 are accounted for under ASC 310-20. These loans are initially recorded at fair value and include credit and interest rate marks associated with acquisition accounting adjustments. Purchase premiums or discounts are subsequently amortized as an adjustment to yield over the estimated contractual lives of the loans. There is no allowance for loan losses established at the acquisition date for acquired performing loans. An allowance for loan losses is recorded for any credit deterioration in these loans subsequent to acquisition. Acquired loans that met the criteria for impaired or nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if Juniata expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Juniata may no longer consider the loan to be nonaccrual or nonperforming, and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment. Loan Portfolio Classification The following table presents the loan portfolio by class at September 30, 2019 and December 31, 2018. (Dollars in thousands) September 30, 2019 December 31, 2018 Commercial, financial and agricultural $ 48,278 $ 46,563 Real estate - commercial 130,051 141,295 Real estate - construction 41,191 36,688 Real estate - mortgage 154,431 163,548 Obligations of states and political subdivisions 21,883 19,129 Personal 9,487 10,408 Total $ 405,321 $ 417,631 The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of September 30, 2019 and December 31, 2018. (Dollars in thousands) Special As of September 30, 2019 Pass Mention Substandard Doubtful Total Commercial, financial and agricultural $ 42,927 $ 3,450 $ 1,901 $ — $ 48,278 Real estate - commercial 117,119 5,929 6,953 50 130,051 Real estate - construction 39,656 293 1,242 — 41,191 Real estate - mortgage 152,001 337 1,978 115 154,431 Obligations of states and political subdivisions 21,883 — — — 21,883 Personal 9,473 — 14 — 9,487 Total $ 383,059 $ 10,009 $ 12,088 $ 165 $ 405,321 (Dollars in thousands) Special As of December 31, 2018 Pass Mention Substandard Doubtful Total Commercial, financial and agricultural $ 42,757 $ 2,992 $ 814 $ — $ 46,563 Real estate - commercial 125,352 8,590 6,459 894 141,295 Real estate - construction 34,131 — 2,528 29 36,688 Real estate - mortgage 160,774 24 2,569 181 163,548 Obligations of states and political subdivisions 19,129 — — — 19,129 Personal 10,389 — 19 — 10,408 Total $ 392,532 $ 11,606 $ 12,389 $ 1,104 $ 417,631 The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis, only to the extent that it exceeds anticipated principal balance recovery. Until an impaired loan is placed on nonaccrual status, income is recognized on the accrual basis. Collateral analysis is performed on each impaired loan at least quarterly, and results are used to determine if a specific reserve is necessary to adjust the carrying value of each individual loan down to the estimated fair value. Generally, specific reserves are carried against impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of the credit is scheduled through liquidation of the collateral or foreclosure. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at September 30, 2019 and December 31, 2018 totaled $421,000 and $94,000, respectively. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, appraisal age, economic conditions and other known factors are used to determine the charge-off amount. The following table summarizes information regarding impaired loans by portfolio class as of September 30, 2019 and December 31, 2018. (Dollars in thousands) As of September 30, 2019 As of December 31, 2018 Recorded Unpaid Principal Related Recorded Unpaid Principal Related Investment Balance Allowance Investment Balance Allowance Impaired loans With no related allowance recorded: Commercial, financial and agricultural $ 737 $ 738 $ — $ — $ — $ — Real estate - commercial 1,222 1,318 — 909 1,303 — Acquired with credit deterioration 376 400 — 544 592 — Real estate – construction — 1,055 — 27 1,123 — Real estate - mortgage 1,296 1,994 — 1,180 1,912 — Acquired with credit deterioration 749 873 — 971 1,061 — Personal 14 14 — 17 17 — Total: Commercial, financial and agricultural $ 737 $ 738 $ — $ — $ — $ — Real estate - commercial 1,222 1,318 — 909 1,303 — Acquired with credit deterioration 376 400 — 544 592 — Real estate - construction — 1,055 — 27 1,123 — Real estate – mortgage 1,296 1,994 — 1,180 1,912 — Acquired with credit deterioration 749 873 — 971 1,061 — Personal 14 14 — 17 17 — $ 4,394 $ 6,392 $ — $ 3,648 $ 6,008 $ — Average recorded investment of impaired loans and related interest income recognized for the three and nine months ended September 30, 2019 and 2018 are summarized in the tables below. (Dollars in thousands) Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 Average Interest Cash Basis Average Interest Cash Basis Recorded Income Interest Recorded Income Interest Investment Recognized Income Investment Recognized Income Impaired loans With no related allowance recorded: Commercial, financial and agricultural $ 750 $ — $ 12 $ — $ — $ — Real estate - commercial 1,232 5 16 912 — — Acquired with credit deterioration 381 — — 521 — — Real estate - construction — — — 1,990 4 14 Real estate - mortgage 1,284 4 12 1,095 — — Acquired with credit deterioration 763 — — 17 — — Personal 14 — — — — — Total: Commercial, financial and agricultural $ 750 $ — $ 12 $ — $ — $ — Real estate - commercial 1,232 5 16 912 — — Acquired with credit deterioration 381 — — 521 — — Real estate - mortgage 1,284 4 12 1,095 — — Acquired with credit deterioration 763 — — 17 — — Personal 14 — — — — — $ 4,424 $ 9 $ 40 $ 4,535 $ 4 $ 14 (Dollars in thousands) Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 Average Interest Cash Basis Average Interest Cash Basis Recorded Income Interest Recorded Income Interest Investment Recognized Income Investment Recognized Income Impaired Loans With no related allowance recorded: Commercial, financial and agricultural $ 369 $ 22 $ 12 $ 234 $ — $ — Real estate - commercial 1,066 40 16 2,971 — — Acquired with credit deterioration 460 — — 350 — — Real estate - construction 14 — — — — — Real estate - mortgage 1,238 13 35 2,122 14 16 Acquired with credit deterioration 860 — — 698 — — Personal 16 — — 9 — — Total: Commercial, financial and agricultural $ 369 $ 22 $ 12 $ 234 $ — $ — Real estate - commercial 1,066 40 16 2,971 — — Acquired with credit deterioration 460 — — 350 — — Real estate - construction 14 — — — — — Real estate - mortgage 1,238 13 35 2,122 14 16 Acquired with credit deterioration 860 — — 698 — — Personal 16 — — 9 — — $ 4,023 $ 75 $ 63 $ 6,384 $ 14 $ 16 Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are the same, regardless of loan type. The following table presents nonaccrual loans by classes of the loan portfolio as of September 30, 2019 and December 31, 2018. (Dollars in thousands) September 30, 2019 December 31, 2018 Nonaccrual loans: Commercial, financial and agricultural $ 737 $ — Real estate - commercial 912 908 Real estate - construction — 29 Real estate - mortgage 893 753 Personal 14 17 Total $ 2,556 $ 1,707 The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Past due status is determined by the contractual terms of the loan. The following tables present the classes of the loan portfolio summarized by the past due status as of September 30, 2019 and December 31, 2018. Loans Past Due Greater (Dollars in thousands) Greater than 90 30‑59 Days 60‑89 Days than 90 Total Past Days and Current Past Due Past Due Days Due Total Loans Accruing(1) As of September 30, 2019 Commercial, financial and agricultural $ 48,275 $ 3 $ — $ — $ 3 $ 48,278 $ — Real estate - commercial 129,396 229 — 50 279 129,675 — Real estate - construction 40,898 293 — — 293 41,191 — Real estate - mortgage 151,713 592 600 777 1,969 153,682 204 Obligations of states and political subdivisions 21,883 — — — — 21,883 — Personal 9,431 41 1 14 56 9,487 — Subtotal 401,596 1,158 601 841 2,600 404,196 204 Loans acquired with credit deterioration Real estate - commercial 376 — — — — 376 — Real estate - mortgage 536 209 — 4 213 749 4 Subtotal 912 209 — 4 213 1,125 4 $ 402,508 $ 1,367 $ 601 $ 845 $ 2,813 $ 405,321 $ 208 Loans Past Due Greater (Dollars in thousands) Greater than 90 30‑59 Days 60‑89 Days than 90 Total Past Days and Current Past Due Past Due Days Due Total Loans Accruing(1) As of December 31, 2018 Commercial, financial and agricultural $ 46,557 $ 6 $ — $ — $ 6 $ 46,563 $ — Real estate - commercial 139,890 — — 1,214 1,214 141,104 306 Real estate - construction 36,627 32 — 29 61 36,688 — Real estate - mortgage 161,651 824 561 175 1,560 163,211 23 Obligations of states and political subdivisions 19,129 — — — — 19,129 — Personal 10,352 24 15 17 56 10,408 — Subtotal 414,206 886 576 1,435 2,897 417,103 329 Loans acquired with credit deterioration Real estate - commercial 51 140 — — 140 191 — Real estate - mortgage 71 259 — 7 266 337 7 Subtotal 122 399 — 7 406 528 7 $ 414,328 $ 1,285 $ 576 $ 1,442 $ 3,303 $ 417,631 $ 336 (1) These loans are guaranteed, or well-secured, and there is an effective means of collection in process. The following tables summarize information regarding troubled debt restructurings by loan portfolio class at September 30, 2019 and December 31, 2018. (Dollars in thousands) Pre-Modification Post-Modification Number of Outstanding Outstanding Contracts Recorded Investment Recorded Investment Recorded Investment As of September 30, 2019 Accruing troubled debt restructurings: Real estate - commercial 1 $ 306 $ 326 $ 314 Real estate - mortgage 7 488 516 406 Non-accruing troubled debt restructurings: Real estate - mortgage 1 25 25 16 9 $ 819 $ 867 $ 736 (Dollars in thousands) Pre-Modification Post-Modification Number of Outstanding Outstanding Contracts Recorded Investment Recorded Investment Recorded Investment As of December 31, 2018 Accruing troubled debt restructurings: Real estate - mortgage 8 $ 522 $ 550 $ 428 Non-accruing troubled debt restructurings: Real estate - mortgage 1 25 25 17 9 $ 547 $ 575 $ 445 The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation and subsequent charge-off if appropriate. As of September 30, 2019, there were no specific reserves carried for troubled debt restructured loans. One troubled debt restructured loan for $314,000 was in default within 12 months of restructure during the three and nine months ended September 30, 2019. There were no troubled debt restructur |